MODULE 1
Resources and the Study of Economics: First is
What is Economics?
 Economics comes from the ancient Greek word
“oikonomikos” or “oikonomia.” Oikonomikos
literally translates to “the task of managing a
household.”
 Adam Smith defined economics as “an inquiry
into the nature and causes of the wealth of
nations.”
 While Alfred Marshal's definition of economics
is study of man in the ordinary business of life.
Marshall argued that the subject was both the
study of wealth and the study of mankind. He
believed it was not a natural science such as
physics or chemistry, but rather a social science.
 Economics is essentially a study of the usage of
resources under specific constraints, all bound
with an audacious hope that the subject under
scrutiny is a rational entity which seeks to
improve its overall well-being.
 The aim of studying economics is to understand
the decision process behind allocating the
currently available resources, the needs always
unlimited but resources being limited.
Two Branches
1. microeconomics (individual choices) which
deals with entities and the interaction between
those entities
2. macroeconomics (aggregate outcomes) deals
with the entire economy as a whole.
3 strands of the definition of Economics
1. Wealth (wealth-getting & wealth using),
2. Decision-making process (making choices)
3. Allocation process (allocation of scarce
resources to meet the unlimited human wants)
2 major Economic Problems
1. Production which is the disposition of produced
Goods and Services
2. Consumption which is the consuming the Goods
and Services.
Key elements of Economics as Study of Allocation:
1. Economics as Social Science (identifying the
problem, hypotheses, gathering and treating the
data and
2.
Natural Resources- marine, forest, agricultural
and mineral, second is Human Resources are
the qualities of human beings that may include,
labor, intelligence, creativity, health, education
and talents and the last one is Physical or Man-
made Resources that includes various types of
buildings, equipment, technology, bridges,
airports, factory plants and other physical
infrastructure that can be used to provide present
and future satisfaction.
3. Human wants and Economic Analysis (Human
Wants and Needs)
4. Scarcity as a source of economic problem
Scarcity- (limited) is a general characteristic of
resources in the light of its competing uses that
may arise from the rapid expansion of human
wants and make choices. Shortage- is a
condition when the supply of a good, service, or
resource is not enough to meet the demand.
Surplus- is a condition when the supply of a
good, service, or resource is greater than the
demand.
5. Allocation and the Act of Economizing (Market
System, Command System and Tradition
System)
Opportunity costs represent the benefits an individual,
investor or business misses out on when choosing one
alternative over another. The four factors of production
are:
1. Land - includes all natural resources used in the
production process. (rent)
2. Labor - physical actions and mental activities
that people contribute to the production of goods
and services (wages)
3. Capital - all manufactured aids used in
producing consumer goods and services.
(interest)
4. Entrepreneurial ability - special human resource,
distinct from labor supplied by entrepreneurs-
combines all resources, makes strategic
decisions, bears risk. (profit)
The following are the three basic economic questions
and this idea can be seen from the book entitled Applied
Economics of Phoenix Publishing house by Tereso
Tullao.
1. What to produce? (ones to be produced)
 2. How to produce? (the manner of production/
technology)
3. For whom to produce? (for whom the
commodities will be produced by allocating a
higher proportion of output to members of a
society with high purchasing power)
4. Who dictates?
 Market System (business owner)
 Command System (government)
 Traditional System (both)
SEVEN Basic economic problems and the Philippine
socioeconomic development in the 21st century
1. Poverty and Unequal Distribution of Income.
 According to Kumar, Gaurav, in his
online article in Investopedia.com,
Poverty is an economic state where
people are experiencing scarcity or the
lack of certain commodities that are
required for the lives of human beings
like money and material things. There
are two categories of Poverty: Absolute
poverty (below): Also known as
extreme poverty or abject poverty, it
involves the scarcity of basic food, clean
water, health, shelter, education and
information and Relative Poverty
(above): It is defined from the social
perspective that is living standard
compared to the economic standards of
population living in surroundings.
2. Demographic changes and its Economic
Implications
 According to the book entitled Applied
Economics of Phoenix Publishing house
by Tereso Tullao, Demographic changes
is an Increase in population, which
implies additional consumers and savers
that can expand the economy while
additional laborers can be the source of
productivity, creativity and
entrepreneurship. The Internal
Migration can reduce the labor force in
sending regions which can exacerbate
their already sluggish economic
performance while the External
Migration may engender a culture of
dependency as recipients of remittances
may be content with the external income
transfers rather than work.
3. Low investment in Human Resource
Development
 According to the book entitled Applied
Economics of Phoenix Publishing house
by Tereso Tullao, the size of the labor
force can have positive contributions on
economic growth, the quality of human
resources has greater growth, the quality
of human resources has greater growth
impact.
 Skills of labor does not improve due to
lack of finances
4. Weak Infrastructure
 According to Hannah Enriquez, in her
online article that the Government can
improve the infrastructure by
implementing fiscal reform program,
continuing reform in key sectors
particularly in power, roads and water,
improving central oversight of the
planning and coordination of
investments and focus on investment
through public-private partnerships.
5. Pursuing Food Security
 Food Security implies that the country
and its people should have enough
income to purchase food grains at the
cheapest price anywhere in the world.
6. Slow Adoption of Modern technology
 Technology- the manner of processing
raw materials or intermediate inputs into
transformed outputs through the use of
factor inputs. Labor Intensive
Technology- a technology that is biased
in the use of labor while Capital
Intensive Technology- refers to use of
more capital relative to labor in the
production process.
7. Environmental Sustainability and the country’s
Development thrust.
 Environment- is part of natural
resources where we derive income from
the utilization of its wealth. According
to Nils Zimmerman, there are different
environmental problems; Air pollution
 and climate change, deforestation,
species extinction, soil degradation and
overpopulation.
MODULE 2
 Supply – willingness and ability to sell
(producers)
 According to Jim Chapellow, Supply is a
fundamental economic concept that
describes the total amount of a specific good
or service that is available to consumers.

Demand, Supply, and Equilibrium

Supply and demand (ceteris paribus-all other factors
Economics is all about Scarcity - People have unlimited remain constant)
wants, but there is only a limited number of
resources. Therefore, economics is all about
allocation, answering the three economic
questions: What to produce and in what
quantity? How to produce? For whom to
produce? So this will be part of a market,
according to Will Kenton, in his online article
in Investopedia, Market is a place where two

Law of Demand

 States that if price of

good rises, the quantity
demanded of that good
decreases (vice versa)
 Inverse proportionality

parties can gather to facilitate the exchange of goods and

services.

 Demand – ability and willingness to buy

(consumers). Refers to consumers' desire to
purchase goods and services at given prices.
 Pro byers – Pro consumers
 Number of buyers
 Downward curve – Downward Slope Law of Supply

 States that if the price of good

rises = the quantity supplied
of that good also increases
(vice versa)
 Direct proportionality
 Upward Slope

Through the market mechanism, the

market would eventually reach the
market equilibrium, the most optimal and efficient
situation for both buyers and sellers.

Demand increases – shift to the

right
Demand decreases – shift to the
left

Determinants / Shifters of
Demand
1. Change in the number of
consumers in the market
for a product
a. Consumer increases – Demand increases
b. Consumer decreases - Demand decreases

2. Taste and Preferences

a. New goods become available
b. Fashion and Trends change
c. Advertisers succeed in influencing tastes

3. Change in Consumer Income

a. Income increases = Demand increases
b. Income decreases = Demand decreases
Types of Goods
 I. Normal goods
 Income increases = Normal goods
increases
 Income decreases = Normal goods
decreases
II. Inferior goods
 Income increases = IG decreases
 Income decreases = IG increases
4. Change in the price of related goods
a. Compliment
- A change in the price of one good can
change the demand for another good.
One type of related goods is
complements-goods that are purchased
together.
b. Substitute
- A change in the price of one good can
change the demand for another good.
One type of related goods is substitutes-
goods that are bought in place of other
goods.
5. Price Expectation
- The expectation on what is going to
happen to the price can influence the
demand for the commodity.
a. Price increase in future = Demand increase
today
b. Price decrease in future = Demand decrease
today
When there are changes in non-price factors, the entire
supply curve can either shift to the left (inward) or to the
right (outward). Supply also changes as well as quantity
supplied.
a. To the right – increase
b. To the left – decrease
Determinants / Shifters of Supply
1. Price of Production Inputs
a. Production Input increases = supply
decreases
b. Production Input decreases = supply
increases
 A change in the price of labor or some other
factor of production will change the cost of
producing any given quantity of the good or
service. This change in the cost of
production will change the quantity that
suppliers are willing to offer at any price. An
increase in factor prices should decrease the
quantity suppliers will offer at any price,
shifting the supply curve to the left. A
reduction in factor prices increases the
quantity suppliers will offer at any price,
shifting the supply curve to the right.
2. Government Action
a. Taxes increases = subsidies decreases
- An increase in sales tax, real estate tax
and other business taxes can increase the
costs of supplying a commodity. This in
turn may discourage the sellers to
increase their supply of the commodity
in the market.
b. Subsidies in Robotics increases = Supplies
increase
- When government agencies provide
subsidies to certain industries and firms,
a part of the cost of production is
defrayed, making it more attractive for
sellers to produce. Thus, subsidies
increase supply in the market.
3. Technology
- A change in technology alters the
combinations of inputs or the types of
inputs required in the production
process. An improvement in technology
usually means that fewer and/or less
costly inputs are needed. If the cost of
production is lower, the profits available
at a given price will increase, and
producers will produce more. With more
produced at every price, the supply
curve will shift to the right, meaning an
increase in supply.
a. Technology increases = Supply increases
4. Seller expectations
- If there is an expectation that the price
will increase next season, producers
would be encouraged to hoard their
goods in anticipation of a higher price in
the near future.
a. Price increases = Supply deceases today
 = Supply increases in
the future
MODULE 3
5. Number of sellers
- The supply
curve for an
industry, such
as coffee,
includes all the
sellers in the
industry. A
change in the
number of
sellers in an
industry
changes the
quantity
available at each price and thus changes
supply. An increase in the number of
sellers supplying a good or service shifts Demand is all about consumers and supply is all about
the supply curve to the right; a reduction producers. Therefore, there are different factors that
in the number of sellers shifts the supply affecting demand and supply. However, in order to
curve to the left. understand and analyze the effects of contemporary
a. Number of sellers increases = Supply issues, we must first know the migration, fluctuations in
increases the exchange rate, oil price increases, unemployment,
b. Number of sellers decreases = Supply peace and order, etc. on the purchasing power of the
decreases people.
According to Tereso Tullao (2016), the following are the
contemporary economic issues facing the Filipino
Price Ceiling Vs Price Floor Entrepreneur:
 According to Tereso Tullao (2016), from his  Investment is a product that people buy with
book Applied Economics, Price Floor is a legal the hope that they will be beneficial or will
minimum price imposed by the government generate income in the future.
while the Price Ceiling is a legal maximum price  Rentals is a property from which the owner
imposed by the government. receives payment from the occupant(s), known
as tenants, in return for occupying or using the
property.
According to Tereso Tullao Jr. (2016), from the book of  External Funds is made by firms and other
Applied Economics, Market Structure identifies how a organizations that are deficient in funds to
market is made up in terms of: finance their investment needs.
 Wage Rate imposed by the government which
a. The number of firms in the industry
is higher than the equilibrium wage rate can
b. The nature of the product produced
have consequences on the labor market as well
c. The degree of monopoly power each firm has
as on firms.
d. The degree to which the firm can influence price
 Minimum Wage is an example of floor price
e. Profit levels
that prevents the market to seek its equilibrium
f. Firms’ behaviour – pricing strategies, non-price
condition because of a government policy or
competition, output levels
legislation.
g. The extent of barriers to entry
h. The impact on efficiency  Income tax holidays are given to firms so they
can be more profitable at their initial years since
 they are exempted from paying their income tax
for a certain period of time.
 Taxes are considered inflows for the
government and outflows for firms and business
that apply percentage tax on gross receipts (3%)
or value added tax (12%).
5. Long-distance migrants go to one of the great
centers of commerce and industry.
6. Natives of towns are less migratory than those
from rural areas.

7. Females are more migratory than males.

8. Economic factors are the main cause of

migration.

Push Factor is what induces the people to leave old

Migration
residences and in simpler terms is anything that forces
 seasonal movement from one region to another. people to move out of a certain area.
It’s a person’s movement from one part of a
Pull Factor is what induces people to move to a new
place to another
location.
 Labor Migration is the process of leaving one's
country to establish residence in a foreign
country for the purpose of work.

Wil Kenton defines Emigration as the relocation or

process of people leaving one country to reside in
another. (Example. If you live in Philippines and you
move to the United States and try to set up permanent
citizenship, this is an example of emigration.) while
Immigration is the moving in from a country to a new
one. It is the international movement of people into a
destination country of which they are not natives or
where they do not possess citizenship in order to settle
or reside there.
Ernst Georg Ravenstein is a German-English geographer
cartographer that established a theory of human
migration in the 1880’s. He called the following the
“Ravenstein’s Laws of Migration":
1. Most migrants move only a short distance.

2. There is a process of absorption, whereby

people immediately surrounding a rapidly
growing town move into it and the gaps they
leave are filled by migrants from more distant
areas, and so on until the attractive force [pull
factors] is spent.

3. There is a process of dispersion, which is the

inverse of absorption.

4. Each migration flow produces a compensating

counter-flow.